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8 key points of advice before choosing a Brazilian Investment

November 26 2014

Brazil is one of the fastest growing economies, property and consumer markets in the world and successful investing in Brazilian land, property and real estate comes with distinct things to look for as well as things to avoid.

Based upon our experience as a premier international Brazilian property developer, here are our key points of advice before you choose a Brazilian investment to ensure you invest safely, securely and profitably in this exciting high growth market.

It is notoriously difficult to secure planning permission and the right licences, therefore many projects are made available only to non-Brazilian nationals for sale, in the hope they will secure the relevant permission at a later date. Due to strict environmental laws, many developments (and customers) can be left high and dry if these are not granted. Despite being cheaper to buy, there is a risk that land without permission may never be developed or increase in value.

1)      ENSURE THE REAL ESTATE PROJECT YOU BUY IS BEING SOLD TO BRAZILIANS

In 2007 Brazilian law made it a criminal offence to sell any development to Brazilian nationals that did not have its full build licences in place and that had not started construction. Unfortunately many international developers circumvent these risks by only selling their project to Europeans and other nationalities outside of Brazilian legal jurisdiction.

2)      DON’T ASSUME THE BEACH IS ALL THE BRAZILIAN MARKET DESIRES

Brazil has 4680 miles of beach, with 85% of its population living within 20 miles of the coastline. Beaches are easily accessible and, given the highly social and active nature of the Brazilian people, developments that offer extensive facilities as well as good beach access are highly desirable.

3)      ENSURE THE LOCATION OFFERS SOMETHING UNIQUE TO TOURISTS AND RESIDENTS

Following the international crowd into areas with heavy international development of real estate already in place is not always the best move. With the right research look at beaches, cities and surrounding areas with specific history, locations, geography, facilities, infrastructure that is in place or already under development. Remember… ‘Location, location, location’.

4)      RESEARCH THE MECHANICS OF ‘SPECIAL DEALS’

Guaranteed rental, no-money-down, guaranteed APR return, etc. are deals that sometimes involve complex financial mechanisms, often involving purchasing property off-plan. More often than not they do not allow you to hold title on your investment until after the development is complete and you have paid in full. It is wise to understand how these deals are budgeted for and to ensure that they stand up commercially. You need to understand what the risks to your deposit may be before making your commitment.

5)      HAVE THE RIGHT LEGAL REPRESENTATION

Work with the right lawyer with international presence and regulation as well as a strong understanding of both Brazilian law and of the structure of the project you are investing in.

6)      WORK WITH THE RIGHT PARTNERS

It is important when investing in a new market to ensure you select partners who truly understand not just the immediate area of interest, but whom have also been working successfully within Brazil over a number of years. History in other countries is one thing; however a successful history in Brazil helps you further. Local knowledge is critical to success and reducing your risk. Ensuring you work with developers, sales and estate agents, legal partners with their own trusted local networks is paramount in ensuring you receive the best advice.

7)      VISIT THE PROJECT OR HAVE A TRUSTED ADVISOR VISIT ON YOUR BEHALF

The best way to truly realise the potential of your investment is to see it for yourself. A very close second is to ensure your due diligence is actually carried out by a professional (lawyer or advisor) who has actually seen the project (not just the location) for themselves. Pictures and glossy marketing only tells part of the story, whereas real due diligence involving site visits and the project put into its true context within the area itself, will tell you the rest.

8)      TIMING IS EVERYTHING… ‘YOU SNOOZE YOU LOSE’

Success in investing is in the timing. The majority of high profits are made by getting into a market early. Brazil is at the start of its growth cycle and is a nation becoming wealthier by the day. If you wait until the bulk of investors enter this market before you do, your returns will be minimal in comparison. The trick is for you to exit your investment by selling to those very same ‘late adopter’, or market ‘laggard’, investors jumping on the Brazil bandwagon much later in the Brazilian growth cycle. If you wait for Brazil to become a mainstream investment destination then the market will have already matured and returns will be less.

Invest in Brazil Ltd offers international investors exceptional opportunities for rapid growth in their investment in areas such as land, real estate and property. We encourage any potential investor or property owner to add the above tips to their own investment criteria and use these to screen any other property opportunities you may be exploring including our award winning Tambaba Country Club Resort and Pueblo Do Mar residential housing developments in North East Brazil.

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